itac working group - jse itac... · eco-mobility festival tbc potential use another venue wed, 18...

Integrated Trading and Clearing (ITaC) Working Group Session

24 August 2015

Agenda

• ITaC User Readiness checkpoint

• Deal Management and Clearing

• Functional summary & topics covered to date

• Collateral Management including integration to Strate

• JSE collateral management functionality recap

• Strate collateral management

• Off Book Trade Reporting Model

• Integration to Deal management

2

Proposed ITaC phases

• The programme consists of 2 Projects

• Project 1:

• Phase 1a: Equity Market upgrade for trading only

o Targeting Q3 2016 (dependent on T+3 implementation)

• Phase 1b: Equity Derivatives Market

o Targeting Q2/3 2017

• Phase 1c: Currency Derivatives Market

o Targeting 2 months after Phase 1b implementation

• Project 2: Commodity Derivatives Market, Interest Rate Derivatives and Bonds Markets

3

User Readiness Checkpoint

• 5 technical working groups held to-date • Good attendance thus far

• On average approx. 115 attendees on site • On average approx. 22 attendees via webinar • However, we’re concerned this has not included representation from all

clients

• Clients requested more detail in published invitation agenda items to

assist them in confirming the correct audience • Clients invited to contact us should they wish to have a one on one

session with the JSE team • All previous technical working group presentations can be found on the

JSE website at the following link: https://www.jse.co.za/services/post-trade-services/itac

• We urge clients to ensure the right level of participation

4

https://www.jse.co.za/services/post-trade-services/itac














2015 Working Group (WG) Schedule

Date Time Status

Tues, 12 May 2015 11h00 – 13h00 SAST Complete

Mon, 18 May 2015 10h00 – 12h00 SAST Complete

Thurs, 28 May 2015 10h00 – 12h00 SAST Combined into 3 June

Wed, 3 June 2015 10h00 – 12h00 SAST Complete

Wed, 1 July 2015 10h00 – 12h00 SAST Combine with/into 8 July

Wed, 8 July 2015 10h00 – 12h00 SAST Complete

Wed, 15 July 2015 10h00 – 12h00 SAST Complete

Wed, 5 Aug 2015 10h00 – 12h00 SAST Combine with/into 24 Aug

Mon, 24 Aug 2015 11h00 – 13h00 SAST In progress

Mon, 21 Sept 2015 10h00 – 12h00 SAST

Mon, 19 Oct 2015 10h00 – 12h00 SAST Eco-mobility festival TBC potential use another venue

Wed, 18 Nov 2015 10h00 – 12h00 SAST

• Proposed 2015 WG Schedule

5

Trading, Clearing and Information Systems All Markets – High-level

REFERENCE, EOD & OTHER

DATA

Trading Member

ORDER & TRADE MANAGEMENT

GATEWAYS

MARKET DATA GATEWAYS

Information Subscribers

ALL MARKETS ALL MARKETS

Information Delivery Portal

(IDP) (FTP)

Reference Data, Statistics & other

ALL MARKETS

Full Depth (MITCH) Throttled & Un-throttled

EQUITY

Indices (FIX)

News (FIX)

LvL1 (FIX)

DERIVATIVES BONDS &

INTEREST RATE

LvL1 (MITCH)

Post Trade (FIX)

DEAL MANAGEMENT &

CLEARING

ALL MARKETS Trading (Native)

Drop Copy (FIX)

EQUITY

Trading (FIX)

Clearing Member

Deal Mgmt (EMAPI)

6

Post Trade Risk Monitoring

Collateral Mgmt

Clearing and Settlement

Margin Methodologies

JSE Downstream

Ref. Data

Equity Trading System

Trading System

Information System

Post Trade

Trading Services

Providers (TSPs)

Order Management Gateways

Trading GW

(Native)

Drop Copy GW

(FIX)

Trading GW (FIX)

Market Data Gateways

LvL1 (FIX)

Full Depth

(MITCH Throttled)


Reference Data

(FTP)

Indices (FIX)

News (FIX)

FTSE

JSE SENS

Post Trade

Post Trade

GW (FIX)

JSE Downstream

Apps

Surveillance

Real Time Surveillance

Trades Indices

Indices News Trades, BBO, Stats

etc

Trading GW

Colocation

Full Depth

(MITCH Un-

throttled)

Un-throttled

ITCH

Low

Latency

TRD

Trading and Information System Current Equity Market

7

Trading and Information Systems High Level Proposed Derivatives Solution

• There will be a set of Market Data Gateways for Equity Derivatives and a set of Gateways for Currency Derivatives • Additional market data gateways will be introduced at a later stage for Commodity Derivatives. • Interest Rate market data will be disseminated via the same gateways as Currency Derivatives

Ref. Data

Derivatives Trading System

Trading System

Information System

Post Trade

JSE Members

Order Management Gateways

Trading Gateway (Native)

Drop Copy Gateway

(FIX)

*Market Data Gateways

MDG Level 1

(MITCH)

MDG Level 2

(MITCH) Throttled


Reference Data (FTP via IDP)

Post Trade

Post Trade

Gateway (FIX)

JSE Downstream Systems

Real Time Surveillance

MDG Level 2

(MITCH) Un-Throttled

Trading Gateway

Colocation

(Native)

* 8



DATA

Trading Member


GATEWAYS





(IDP) (FTP)


ALL MARKETS


EQUITY

Indices (FIX)

News (FIX)

LvL1 (FIX)

DERIVATIVES BONDS &

INTEREST RATE

LvL1 (MITCH)

Post Trade (FIX)

DEAL MANAGEMENT &

CLEARING


Drop Copy (FIX)

EQUITY

Trading (FIX)

Clearing Member

Deal Mgmt (EMAPI)

9


Collateral Mgmt



High level topics covered to date: • ITAC timeline principles • Project Scope for Project 1a and 1b • High Level Trading Overview • High-level trading daily lifecycle • Trading Frontend decision • Important considerations for JSE Services agreement (JSA), sharing

infrastructure and network service providers • High-level functions and messages of the trading gateways • Trading Firm Structure • Trading Drop Copy functionality • Entity and account structure • User access and enablement



DATA

Trading Member


GATEWAYS





(IDP) (FTP)


ALL MARKETS


EQUITY

Indices (FIX)

News (FIX)

LvL1 (FIX)

DERIVATIVES BONDS &

INTEREST RATE

LvL1 (MITCH)

Post Trade (FIX)

DEAL MANAGEMENT &

CLEARING


Drop Copy (FIX)

EQUITY

Trading (FIX)

Clearing Member

Deal Mgmt (EMAPI)

10


Collateral Mgmt



High level topics covered to date: • ITAC timeline principles • Project Scope for Project 1a and 1b • High Level Clearing Overview • Clearing member discussion topics • Important considerations for JSE Services agreement (JSA),

sharing infrastructure and network service providers • Deal management frontend decision • High-level clearing daily lifecycle • Collateral Management • Single integrated EOD process • Interfacing to clearing • Alternate clearing member concept • Real time clearing interface functionality • Deal management functions

Agenda









11

Deal Management & Clearing (Real Time Clearing (RTC))

Real Time Clearing (RTC) Functional Overview

Risk management

Collateral management

Default management

Trade receipt Deal

management Position

management

Trading System Strate

Collateral Mgmt

System Clearing Member

(CM)

Reference data

JSE Internal Systems

Settlement Bank

Authorised FX Dealer

CM, TM, Client, CSDP

Settlement

Non-market facing functions (Valuations, stress testing, back

testing, etc.)

JSE Information

Delivery Portal

Trading Member

(TM)

12

Clearing & Risk Management

Summary of Topics Covered To-Date

Margin methodologies

Post-trade (intraday) risk

monitoring

Collateral management

Default management

Settlement

Clearing overview & daily

lifecycle

Legend Covered

Covered at high level, further coverage planned

Not yet covered

• Post-trade functions • Intraday & EOD

processes

• Single EOD run • EOD balancing • Settlement of margins,

interest on cash, fees etc.

• Ad-hoc intraday margin call

• Securities & foreign currency collateral

• EOD & intraday processes

• JSPAN • Margin add-ons • HistVaR

• Setting of intraday exposure limits

• Exposure updates and alerts

• Client default • Trading Member

default • Clearing Member

default

13

Deal Management

Summary of Topics Covered To-Date (cont.)

Principles for trade reporting and deal management

in agency & principal capacity

Deal management functions and

examples

Legend Covered


Not yet covered

Interfaces, access and data structures

Deal & position updates

Reference & pricing data

Billing structures & parameters

User access & enablement

EMAPI specifications

Entity & Account Structure

Information Delivery Portal (IDP) file specifications

14

Summary of Topics Covered To-Date (cont.)

General user readiness topics relevant to post-trade (and trading) participants

JSE Rules & Directives changes

Data take-on & go-live activities

Connectivity Customer Testing &

Conformance

JSE services agreements

Clearing Member relevant functions facilitated by the Trading system

Pre-trade risk management

• Permissions • Limits • Controls

Monitoring of trading activity

• Orders (drop copy) • Trades • On-behalf-of activity • Market data

Legend Covered


Not yet covered

Disaster Recovery

15

Post Trade Interfaces High Level Proposed Solution

CLEARING SYSTEM

Deal Management, Clearing & Back Office Front Ends/API Solutions

INFORMATION DELIVERY PORTAL

(IDP) (FTP) TRADING SYSTEM

Post Trade G/W

Drop Copy G/W

Market Data G/W

Deal Management & Clearing

G/W (EMAPI)

Open Interest (periodic) Live Prices

Other Market Data

Orders (COB)

Trade and Position updates

Deal Management

New contracts intraday

Client Maintenance

Intraday Risk Monitoring

Collateral Mgmt

EOD Balancing

Trades (COB &

Reported)

Clearing Ref Data

MTMs, Rates

Vol surfaces

Fees Invoice

Fee Structures

Daily A/c Summary

Opening Positions

Trades

Open Interest

Monitoring of trading activity

16

Clearing Daily Lifecycle Summary

Intraday Inter-day (EOD/SOD)

*Open interest published via market data gateways

Throughout the day

At certain times in the day

EOD margin & fees processes

Preparation for next day

• Deal management • Position & Open Interest* updates • Post trade risk monitoring • Securities collateral substitutions & top-ups • Client maintenance • New contracts

• Collateral intraday batch process • Securities and cash withdrawals

• ZAR and/or FX margins and fees payments (by specified time)

• Benchmark rates published • Early valuations prices published

• Calculate & publish closing prices • Calculate margins & fees • Balance to Clearing Members • Pledging of securities collateral against initial

margin • Calculate ZAR and FX cash payment amounts

• Download reference & other data incl. • Margin parameters • Fee parameters • Member’s own data (e.g. positions) • Etc.

Other EOD processes • Interest on cash (monthly) • Portfolio transfers (ad-hoc) • Corporate actions (ad-hoc)

17

Collateral Management - Recap

• With the implementation of ITaC Phase 1, JSE Clear will cater for the acceptance of securities collateral and potentially also foreign currency collateral against Initial Margin

• For the management of securities collateral the JSE intends using Strate’s Clearstream Collateral Management System (CMS)

• The pledge mechanism will be used for securities collateral

• CSDPS will be required to commit to pledges

• Participants wishing to post securities collateral will need to set up a Segregated Depository Account (SDA) at Strate

18


• An EOD process will cater for

• Pledging of securities collateral against Initial Margin

• Intraday processes will cater for

• Changing the mix of collateral posted against the previous days’ Initial Margin call

• An intraday batch process will cater for

• Substituting securities for cash and vice versa

• Release securities by paying cash

• Release cash by pledging securities

19


• Regularly throughout the day the following will be catered for:

• Securities for securities substitutions

• JSE Clear will send Strate CMS updated prices periodically to ensure substituting securities are equivalent in value

• Securities top-ups

• If the value of the pledged securities on an account falls below a specified threshold due to price decreases, additional securities are pledged to ensure the exposure (IM) is covered

• If securities are not available a cash call is generated (and will be processed in the intraday batch process if received before the start thereof)

20

www.strate.co.za

© Strate

Strate Collateral Management Services - ITAC Date : 24 August 2015

www.strate.co.za

© Strate | 22

• Overview of the changing regulatory framework and T+3

considerations

• Current collateral practices

• Strate’s Collateral Management Solution

• Interaction with SCMS front-end for ITAC

• Interim solution with JSE Clear for add-on margin

Agenda

www.strate.co.za

© Strate

REGULATION Basel III; G20 Solvency II; CPSS-IOSCO; EMIR; Dodd

Frank

Mandatory capital adequacy

and liquidity benchmarks

Mandatory clearing of OTC

derivatives

Mandatory Initial and variation

Margining of non-cleared OTC derivatives

Increased level of

collateralisation of bi-lateral transactions

Secured Money Markets replacing

clean credit

Increased demand for HQLA

as collateral

More demand for collateral from

buy-side

Global fragmentation of

collateral

Restricted re-use of collateral securities

Greater segregation of

collateral assets

| 23 Collateral Management Drivers Post Global

Financial Crisis

www.strate.co.za

© Strate 24

Jan 2014 Jan 2019 Jan 2015 Jan 2016 Jan 2017 Jan 2018

70% 80% 90% 100% Liquidity Coverage Ratio (LCR))

60%

Jan 2020

Net stable funding ratio (NSFR)

Solvency Assessment and Management (SAM)

Mandatory central counterparty clearing of OTC derivatives

T+3 Shorter Equities Settlement Cycle

Increased demand

for HQLA as collateral

SA Timeline for Regulatory Implementation

Liquidity is an essential component in facilitating an efficient and orderly market

BASEL

III SARB

CLF

Bi-lateral collateral requirements for non-cleared OTC derivatives To be

confirm

ed

G20,

FMA

Securities Initial & additional Margin Listed

Derivatives and Default Fund

JSE

High Quality Liquid Assets

(HQLA) – Cash, Government

Bonds, Top 40 equities, highly

rated Corporate Debt

Insurance

Companies

www.strate.co.za

© Strate | 25

T+3 Considerations

• Security collateral movements to be on a same day basis as with Securities Lending

& Borrowing loans and returns

• A shorter settlement cycle would also require the shortening of the corporate action

cycle, which requires more efficient processes in order for investors to respond

timeously on elective events.

• Increased Margin requirements for brokers

• Increased operational risk

• Dividends withholding tax implications

• Out and out cession implications with imminent STT exemption

www.strate.co.za

© Strate 26

Collateral Management Challenges for Market

Participants

• What do I have?

• Where is it located?

Collateral identification and

location

• Can I move it?

• How – pledge or cession?

• Timeframe?

Collateral mobilisation

• What is the cheapest to deliver?

• Authorised reuse under cession with

• Impact on my underlying portfolio?

Collateral optimisation

• Do I have the right collateral?

• If not, how do I transform it? Collateral

transformation

Right collateral for the Right exposure at the Right time

at the Right Place

www.strate.co.za

© Strate

A B

E F

I J C D

G H

X Y

K L

Typical Bilateral Relationships 27

www.strate.co.za

© Strate | 28

Current South African Market trends

• Unsure of the full impact of regulations on the availability of high quality liquid assets

(HQLA) – cash and government bonds – top 40 equities?

• Tighter equity settlement timelines with t+3

• SARB Committed Liquidity Fund – enable banks to meet Basel III ratios

• Collateral moves on t+1 or later

• Uncertainty of current size and location of collateral

• Over-collateralised positions – inefficient and costly

• Long lead times for collateral recall – trade settlements and Corporate

Actions/Capital Events

• Uncertainty of current costs of placing collateral

www.strate.co.za

© Strate | 29 Strate’s role

Tolerances Haircuts Excess/deficit

tolerances Concentration

Limits Eligibility Changes

Exposu

res

Securities lending & borrowing

OTC derivatives - bilateral

CCP

Repos

Debt

Central Bank

• Securities remain in

local jurisdiction;

• Securities move near

real–time;

• Respecting local

regulation and

legislation.

• International

Interoperability and

Partnerships

Validation

Eligibility Profiles

Collateral Valuations

Automatic Allocation of

collateral

Automatic Substitutions

Automatic Top-up, Returns, Cash Calls

Reporting

www.strate.co.za

© Strate 30 Other Role-Players in Strate Collateral

• CSD Participant: Administrates securities movements initiated by Strate Collateral in

SDA accounts

• Commercial banks: Facilitates cash settlements

• South African Reserve Bank: Confirms cash settlement through the Real Time Line

(RTL)

• Collateral Givers and Receivers: provide exposures to collateralise on the platform

• JSE Clear: A collateral receiver

www.strate.co.za

© Strate | 31 SDA accounts

• Segregated accounts at Strate, administered and opened by a CSD Participant

• Keeps an audit trail of all collateral moves into segregated received accounts to ensure

that the location of collateral is always known

• Increased asset safety and legal certainty in the event of early termination, default or

insolvency

• Contracts under pledge, unauthorised collateral re-use or limited re-use is controlled

within the solution through these accounts

• To open SDA accounts is free

www.strate.co.za

© Strate | 32

Collateral Optimisation

• Most formal studies on collateral optimisation affirm that optimisation can reduce

operational costs by 20-30%

• New revenue opportunities:

o Optimised returns on retained assets

o Client collateral transformation

o Reduced operational risk of liquidity management

• Operational risk reduction with resultant reduced operational risk capital

www.strate.co.za

© Strate 33

Clearing Member

(Collateral Receiver &

Giver)

Trading Member

(Collateral Giver)

JSE Clear

Equities, Bonds (pledge)

The Collateral re-use Chain

Equities, Bonds , cash (cession)

Securities Lending

Counterpart

(Collateral Giver)

Equitie

s, Bonds , c

ash

(ple

dge)

RE-USE = YES

RE-USE = NO

RE-U

SE =

NO

www.strate.co.za

© Strate 34 Role players in ITAC and their interaction

with Strate

JSE Clear

Front-end New Integration Existing Integration

CM/TM/Client

CSDPs

Settlement

instructions and

reporting

Reporting and

Monitoring

Input, Reporting and

Monitoring

www.strate.co.za

© Strate | 35 ITAC interaction with Strate Collateral

JSE Clear

1 Report Exposure against

CM/TM/Client

CSDP of

JSE Clear

CSDP of

CM/TM/Client

JSE Clear

Received

Account

CM/TM/Client

Giver Account

2 Auto-Commit

To transactions

2 Auto-Commit

To transactions

CM/TM/Client

4 Reporting via csv,

Xml or MT messages

All reporting and

monitoring on the

Strate Front-end

Automated Instructions Automated Reporting

All reporting and

monitoring on the

Strate Front-end

Pledge “From” Pledge “To”

3

Settlement

Bonds

Equities

www.strate.co.za

© Strate | 36 Interim solution for Add-on Margin (Q4 2015)

JSE Clear

1 Report Exposure against

CM/TM/Client

CSDP of

JSE Clear

CSDP of

CM/TM/Client

JSE Clear

Received

Account

CM/TM/Client

Giver Account

2 Commit

To transactions

2 Commit

To transactions

CM/TM/Client

4 Reporting via csv,

Xml or MT messages

All reporting and

monitoring on the

Strate Front-end

Instruction on Strate

Front-end Automated Reporting

Input of exposure and

All reporting and

monitoring on the

Strate Front-end

Pledge “From” Pledge “To”

3

Settlement

Bonds

Equities

THANK YOU

www.strate.co.za Follow us on Twitter, Facebook and LinkedIn

© Strate

[email protected]

Agenda









38

Post Trade Gateway

Service Description

• Real-time information on the trades executed on the current trading day via TCRs (trade capture reports)

• Trade Cancellations

• Trade Reporting for Off Book Trades

(Details of trades executed on previous trading days is not available via this service)

Real-Time Connections

• A client will receive the details of each of its own Trades (On and Off Book) immediately after they are executed

Query-Based Service

• A query-based client will not receive any real-time notifications of trades.

• Query based clients must send a request to the server requesting details of trades as and when they are required

Trading Members (TM) and Clearing Members (CM) can have access to both real-time and query based services

39

Post Trade Gateway Logical Flow

• TMs and CMs connect to the Post Trade GW • TMs will receive On Book Trade confirmations and can submit Off Book

Reported Trades through the gateway • CMs will be able to receive all confirmed TCRs for TMs they are configured for

FIRM (ABCD)

EDMPostTrade

IRPostTrade

CDMPostTrade

GLOPostTrade

FXPostTrade

FIPostTrade

Post Trade Gateway

(FIX)

Permission Tables

De

riva

tive

s Tr

adin

g Sy

ste

m

40

Post Trade Gateway On Book Trade Information

• The FIX TCR message is used to transmit the details of each trade

• A TCR must be sent for each side of a trade to the Buying TM and the Selling TM. In the case of an On Book trade:

• TradeHandlingInstr (1123) will be Trade Confirmation (0);

• TradeReportType (856) of Submit (0);

• ExecType (150) will be Trade (F);

• MatchStatus (573) will be Matched (0);

• TradeReportTransType (487) will be New (0);

• TradeReportType (856) will be Submit (0)

• Each message will contain both basic and value added information on the trade (e.g.

price quantity etc.), the security (e.g. Security ID) and the party (e.g. Member Firm, Trader Group, Trader ID)

41

Post Trade Gateway Cancellation of On Book Trades

• Prior permission must be received from Market Regulation to cancel an On Book Trade as it must meet the specified requirements

• An On Book trade will only be cancelled if requests to cancel it are received from

both sides of the trade (i.e. buyer and seller) • Each member firm must separately submit an Off Book cancel request to the Post

Trade Gateway by submitting a Trade Capture Report and the system acknowledges or rejects the cancel request via a Trade Capture Report

• Once both matching cancel requests are received by the system, the system will

confirm the trade cancellation to both firms via separate Trade Capture Reports • Neither firm may withdraw a pending trade cancellation request • Unmatched trade cancellation requests are automatically deleted by the system at

the end of the day. A notification is NOT sent to the initiating firm upon expiry of the unconfirmed trade cancel request

42

Post Trade Gateway Off Book Trade Reporting

• Member Firms can submit Off Book trades to the respective markets in accordance with the rules for reporting trades in the respective market

• Each reported trade is subject to a series of validations and, if accepted, will be confirmed by the server

• A confirmed Off Book trade will be disseminated via the market data feed immediately if the trade type is stipulated as being published to the market

• Member Firms can also request the cancellation of confirmed Off Book trades • There are two types Off Book Trade reporting models available

• Single Party Trade Reporting Model

• Dual Party Trade Reporting Model

43

Post Trade Gateway Off Book Trade Reporting – Single Party Trade Reporting

• Same member firm is on both sides of the trade (buyer/seller) and the member firm submits both sides of the trade in a single Trade Capture Report

• A Trade Capture Report Ack will be used by the server to acknowledge the receipt of or rejection of a trade report

• The server will transmit a Trade Capture Report if the trade is confirmed • The cancellation of an Off Book trade process is identical to that used to report it • The Trade Capture Report will, in addition to the instrument, include quantity and

price • Trade reports will include a valid Off Book trade type • The dealing capacity and client account information will be mandatory for both

sides of the trade i.e. buyer and seller • Same day cancellations of an Off Book trade must be performed only within the

current trading day • Next day cancellations of an Off Book trade will be submitted as a new trade

however the buyer and seller information needs to be swapped around i.e. Buyer in previous day Off Book trade will be the seller in a next day Off Book trade cancellation

44

Post Trade Gateway Off Book Trade Reporting – Single Party Trade Reporting

45

Post Trade Gateway Off Book Trade Reporting – Dual Party Trade Reporting

• Different member firm is on each side of the trade • Off Book trade is initially submitted by one of the parties (usually seller but can be

buyer) via a Trade Capture Report

• Off Book TCR must include the identity of both Firms i.e. FirmID

• The server will send a Trade Capture Report Ack to acknowledge the receipt of or rejection of the Off Book Trade Report Submission Request

• If the Trade Report Submission Request is accepted by the system, the server will automatically transmit a Trade Capture Report to the counterparty Firm to prompt them to either accept or decline the Off Book trade request

• The Trade Capture Report will include all of the trade information provided by the reporting party information (e.g. instrument, price, quantity, trade type, trade time, counterparty etc.) specific to the side of the initiating Firm (e.g. client account) will not be provided

46


• The counterparty must either accept or decline the Off Book trade request via a Trade Capture Report

• A Trade Capture Report Ack will be sent by the server to acknowledge the response of the counterparty Firm

• The server will report the trade confirmation to each of the counterparties via separate Trade Capture Reports if the trade is confirmed by the counterparty Firm

• If the trade is declined, the server will notify the Firm that initially reported the trade via a Trade Capture Report

• An unconfirmed Off Book trade report (i.e. where the counterparty has not yet

accepted or rejected) may be cancelled by the party that initially reported it

• All unconfirmed Off Book trade reports within the system are automatically cancelled by the system at the end of the trading day. A notification will NOT be sent upon the expiry of the unconfirmed Off Book trade report

• The process to cancel an Off Book trade is identical to the process used to report it

47


48

Post Trade Gateway Query-based Service

• A query-based client will not receive any real-time notifications of trade activity

• Query-based clients must send a request to the server requesting the details of trades they wish to receive as and when required

• A client may use the Trade Capture Report Request message to request the details

of all trades or request specific trade details as meet the criteria available on the request

• The server will respond with a Trade Capture Report Request Ack to indicate whether the request is successful or not via

• TradeRequestStatus (750) and

• TradeRequestResult (749)

• The Trade Capture Report Request message can only be used to request a

snapshot of the current trades, it cannot be used to subscribe to all Trade Capture Reports

49

Post Trade Gateway Query-based Service – All Trades

• To request all trades, the Trade Capture Report Request must include a TradeRequestType (569) of All Trades (0)

50

Post Trade Gateway Query-based Service – Specific Trades

• To request specific trades only, the Trade Capture Report Request must include a TradeRequestType (569) of Trades Matching Specified Criteria (1)

• Specific requests can be issued for a selected set of instruments or for a specific party, trade type or order

• A specific Instrument ID

• Type of Trade • Confirmed, Cancelled or Corrected

• Match Type of the Trade • Off Book, Continuous Trading, Auction or Privately Negotiated Deal

• Specific Party Identifiers • Firm, Trader Group and Trader ID or

• Side of the Trade • Buy or Sell

• Specific Order • Either a Client Order ID or an Order ID

51

Post Trade Gateway Query-based Service – Specific Trades

• Example for a request for Trades matching specific criteria

52

On Book and Off Book Trades Integration to Deal Management

• The following section explains the deal management activities that can be performed on trades received from the Trading System

• Refer to the principles relating to trade reporting and deal management of agency and principal trades in accordance with the alignment of the Equity Derivatives market to international best practices as detailed in the 15 July 2015 ITaC Working Group presentation

53

https://www.jse.co.za/content/JSEPresentationItems/20150715 ITaC Technical Working group FINAL.pdf













On Book and Off Book Trades Deal Management Matrix

54

Capacity State of Deal* in RTC Action allowed

Principal

• Accumulate • Deal sub account modification • Position sub account modification • Principal correction • Allocate on exception basis only • Allocation error correction

Agency

On client suspense account

• Accumulate • Allocate • Assign • Tripartite • Deal sub account modification • Position sub account modification

On client account • Accumulate • Allocation correction • Principal correction

* A deal is one side of a trade i.e. either the buy leg or sell leg of the trade

Deal Management – Principal Transactions

TM_A

4. Accumulation,

Deal sub account mod, Position sub account mod,

Principal correction 3.

Deal published

1. Trade

2. Trade

Deal Mgmt and Clearing System

(RTC)

EMAPI

Trading System

Post Trade Gateway

Accumulation, Deal and Position Sub Account Mod’s, Principal Corrections

Deal Management – Principal Transactions

TM_A

5. Allocate to correct

client account

4. Deal

published

1. Trade on incorrect

client account

Allocation of a principal transaction - exception basis only

• When trading as principal with a client, allocations are to be performed on an exception basis only i.e. to rectify an incorrect client code

• In the case of an invalid client code on the trade, the trade will be moved to the member’s house account as it is processed into RTC. An allocation to the correct client account is then done in deal management.

2. Trade

Deal Mgmt and Clearing System (RTC)

EMAPI

Trading System

Post Trade Gateway

3. Trade moved to Member’s house account

Deal Management – Agency Transactions

TM_A

2. Trade

4. Allocate to client

3. Deal

published

1. Trade on client

suspense account

In the event that the agency trade is done directly on the tripartite client’s account, no allocation would be required.

Trading System

Post Trade Gateway


(RTC)

EMAPI

Allocation (Member to Client)


TM_A

2. Trade

4. Assign to TM_B

3. Deal

published

1. Trade on client

suspense account

TM_B

5. Accept deal


(RTC)

EMAPI

Trading System

Post Trade Gateway

Assign (Member to Member)


TM_A

2. Trade

4. Allocate to

tripartite client

3 Deal

published

1. Trade on client

suspense account

In the event that the agency trade is done directly on the tripartite client’s account, no allocation would be required.

TM_B

5. Accept deal

Trading System

Post Trade Gateway


(RTC)

EMAPI

Tripartite Allocation (Member to Tripartite Client)


TM_A

4. Accumulate,

Deal sub account mod, Position sub account mod, Allocation error correction 3.

Deal published

1. Trade

2. Trade


(RTC)

EMAPI

Trading System

Post Trade Gateway

Accumulations, deal and position sub account mod’s, allocation error corrections


TM_A

4. Accumulate

deals 3.

Deals published

1. Multiple trades

6. Cum’ed

deal with avg price

7. Allocate, Assign,

tripartite Cum’ed deal

2. Trade Trading

System

Post Trade Gateway

Deal Mgmt and Clearing System (RTC)

EMAPI

5. Accumulate deals calculating

average price

Illustration - Accumulation followed by allocation, assign, tripartite

Processing of Commissions on Agency Transactions

• As mentioned the JSE is open to exploring options which may support the processing of commissions

• The following slides depict possible flows of commissions in various deal management scenarios for agency transactions

• These flows and the feasibility of business processes and system functionality that would be required in support of them are still under investigation by the JSE

• The flows reflect current thinking and are presented here as a basis to begin engagements with the market on possible solutions in support of the processing of commissions

• The JSE requests input from the market in order to develop a solution that meets the needs of all stakeholders

Processing of Commissions on Agency Transactions

• In order to support the flows depicted in the next slides the following would be required:

• Addition of a field for the ZAR commission amount on the deal in RTC

• This field to be populated by the Member or Clearing Member system via EMAPI

• Inclusion of commission on relevant RTC reports, outgoing deal messages and data downloads

• In the case of give-up activity (assigns and tri-partite allocations) involving two different Clearing Members, JSE Clear involved in the collection and payment of commissions

Commissions processing

Processing of Commissions on Agency Transactions Allocation (Member to Client)

CM_A

TM_A

Client_A

JSE Clear

Allocation

RTC deals data/reporting includes comm

(TBC)

IM, VM, Fees

IM, VM, Fees

Comm

Comm = Member commission

Fees = JSE Booking Fees

IM, VM, Fees


Processing of Commissions on Agency Transactions Assign (Member to Member)

CM_A

TM_A TM_B

JSE Clear

Assign

CM_B



Comm Comm

Comm Comm

IM, VM, Fees

IM, VM, Fees



Fees

Fees

In the event that the TMs involved in the transaction clear through the same CM, there will be no flow of commission between JSE Clear and the CM (due to the net zero effect)


Processing of Commissions on Agency Transactions Tripartite allocation

CM_A

TM_A TM_B

JSE Clear

Comm Comm

Comm

CM_B

Comm

Tripartite Allocation

Comm



IM, VM, Fees

IM, VM, Fees

IM, VM, Fees

Client_B



Fees

Fees

In the event that the TMs involved in the transaction clear through the same CM, there will be no flow of commission between JSE Clear and the CM (due to the net zero effect)

Questions?

[email protected]

+27 11 520 7384

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mailto:[email protected]

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